Tweedledee or Tweedledum

Activists often prod companies to hive off promising businesses from boring cash cows. HP’s split shows the distinction isn’t always clear. The “exciting” servers and networking offshoot is returning more capital as expansion stalls while growth stirs at the PC and printer outfit.

Context News

Hewlett Packard Enterprise said on Oct. 18 it would return $2.5 billion to shareholders in its fiscal year ending October 2019, $2 billion of which would be in the form of share repurchases, and $500 million in dividends. It also increased its share-repurchase authorization by $5 billion. The company now plans to return 75 percent of “normalized” free cash flow to shareholders, up from a previous commitment of 50 percent.

In the same year, the company expects to have $2 billion of normalized free cash flow, but approximately $1 billion of free cash flow after restructuring costs, tax settlements and funding key investments.

Over the long run, the company expects to increase revenue zero to 1 percent per year.